MOODY'S IGNORES THE 'MANUFACTURED CRISIS' AT CPS... Hysterical headlines ignore the destabilization campaign against CPS... How many 'CEOs' and 'CFOs' has CPS had since Rahm began in 2011? The sabotage of CPS administration has been the signal project of the reign of Rahm since May 2011...

George N. Schmidt - June 09, 2015

When Moody's investors Services proclaimed recently that the bond rating of Chicago Public Schools had reached "junk" status, the headlines repeated the usual claims about the so-called "crisis." In addition to ignoring the fact that the CPS and Chicago leadership had been undermining the city's real public schools for a decade or more, Moody's chose to act as if things had just erupted, even to the point of blaming the Illinois Supreme Court for upholding the Illinois Constitution.

On August 28, 2013 Ginger Ostro for the first time presented the meeting of the Chicago Board of Education with the "final budget" for the 2013 - 2014 school year. Above, Ostro, who remains the system's top budget official, presented the budget while "Chief Administrative Officer" Tim Cawley carefully supervised. Substance photo by George N. Schmidt.But as those of us who worked on the CPS budget more than a quarter century earlier, the investment rating services wanted assurance that the school system could maintain stable leadership and an accurate version of the system's financial situation. But beginning at the end of the administration of Richard M. Daley, the destabilization began to escalate. And once Rahm Emanuel appointed David Vitale President of the Chicago Board of Education and Jean-Claude Brizard was Rahm's first "Chief Executive Officer" in May 2011, the nation's third largest school system was subjected to an escalating campaign of internal sabotage.

Not only would CPS have four CEOs in four years, but the top financial officials of the school system would be rotated in what can only be called a game of "management musical chairs." And one of the main things that bond rating agencies demanded was stable -- not routinely disrupted -- leadership.

The names have receded into history:

Pedro Martinez...

Diana Ferguson...

Peter Rodgers....

Ginger Ostro...

Despite the obvious need for an institution managing an operational budget in excess of $6 billion to have stable management, David Vitale, the members of the Board of Education, and the Mayor of Chicago created the opposite. Routinely the leader of the city's financial offices was changed, with one barely becoming visible when he (most were males) would disappear and another take the place.

Comments:

June 9, 2015 at 7:41 AM

By: Rod Estvan

Creation of a crisis is irrelevant to rating agencies

Whether the choices made by CPS constitute a manufactured crisis is in my opinion debatable. One thing has been obvious for decades and that is Chicago's property tax rate is insufficient given the level of state and federal support to CPS. It can more than reasonably be argued tha Illinois is far too dependent on property taxes to fund k-12 education, but all legislative attempts to fix that situation have failed time and again. Even if there was no TIF program at all and all of those funds went to CPS, the district inclusive of charter school expenditures would be in trouble given expenditures.

CPS has since the dissolution of the Chicago School Finance Authority gradually gotten itself into ever greater fiscal difficulties which were exasperated by the 2008 Great Recession which seriously hurt the Chicago Teachers Pension Fund. If Mayor Daley and Mr. Vallas had not reached out and changed the pension laws relating to direct property tax transfers to CTPF the hit the Fund took in 2008 could have been weathered far better. The funds that became available to CPS after the pension legislative changes allowed CPS to float millions in capital bonds which CPS used to rehab numerous schools and build new schools. It was also used to support privatization via charter start ups which has resulted in almost zero savings for CPS even though charter school teachers on average receive less compensation and benefits than CTU members.

But if it makes CTU members feel better calling the current and developing fiscal crisis manufactured then go ahead and do so. But the origins of the crisis are irrelevant to actuarial analysts and credit rating analysts. They care about current accounts and projected revenues. They also care about the fact that the elected Governor of Illinois believes CPS should simply seek a bankruptcy solution based on revisions to State law he has proposed. The people of Illinois voted for Bruce Rauner in big part because he promised not to restore the Illinois income tax rate and contain property tax rates. As is usual most people never contemplated the fiscal implications of their vote and the fact that public sector workers would have to take both wage and benefit cuts in order to balance the books in a manner similar to Wisconsin.

The Chicago Public Schools are seen as a money pit among elected members of the Illinois General Assembly, both Democrats and Republicans from districts outside the city. It is very possible that the panic bill just passed in Springfield which would allow City of Chicago pension fund payments to be reduced by allowing the time for those funds to reach the 90% vested level to be extended may be vetoed by the Governor. If that happens the City will also be thrown into crisis. The future is not bright.

Rodney Estvan

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